Be aware, very aware of THREE implications of that decision for enterprise agreement making

Bryan Mueller and Lauren Townsend

 

The decision of a Full Court of the Federal Court in One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union [2018] FCAFC 77 delivered in late May has three significant practical implications for employers in relation to enterprise agreement making steps and the seeking of Commission approval for an enterprise agreement.

The three implications are explained below.

The first two implications go hand in hand with each other and concern the pre-vote explanation of agreement given to employees and the provision of proof of that explanation to the Commission as part of the approval process.

Those two implications are relevant to every enterprise agreement making exercise (other than greenfields enterprise agreements).

Employers need in every case to tailor their agreement making steps and the approval application material they lodge with the Commission to those implications.

The two implications stem from the interpretation that the Full Court placed on one of the several components of the requirement that the Commission be satisfied that the agreement has been ‘genuinely agreed’ to by the employees covered by the agreement, as specified in s.186(2)(a).

The component of the genuinely agreed requirement concerned is that which arises from the combined operation of ss.186(2)(a), 188(a)(i)) and 180(5)&(6). Read together, those provisions require that the Commission be satisfied that before employees vote on an enterprise agreement the employer has taken all reasonable steps to ensure an explanation of the terms of the agreement and the effect of those terms is given to employees in conformity with ss.180(5)&(6).

First Implication 

The first implication of these two companion implications relates to the content of the explanation given to employees – the Full Court decision makes it apparent that this explanation requirement is to be approached on the basis that its purpose is to ensure that employees voting on an enterprise agreement have information which enables them to cast their vote on a properly informed basis: [115].

Although the One Key decision does not spell out at any level of particularity what the required explanation should contain (because it was not necessary for the Court to do so), the observations made by the Court regarding the explanation given to employees in that case and its inadequacy, indicate that one necessary ingredient of the explanation is that it explain how the terms of the enterprise agreement which employees are asked to approve relate to and/or interact with the terms of any award that would otherwise apply to the employees.

Further, the decision emphasizes that (as required by s.180(6)) the explanation given needs to be expressed in terms that take account of the kinds of employees to whom the explanation is given and particular characteristics that they or some of them have, for example, their language attributes, their age, absence of a bargaining representative if that be the case.

This first implication leads directly on to the second implication.

Second implication

The second implication of these two companion implications is that that the material placed before the Commission in support of approval of the agreement must be sufficient to allow the Commission, as a matter of logic, to form the view that the employer did take the required reasonable steps to ensure that the terms of the agreement and their effect were explained to the employees in a manner that was appropriate to the particular circumstances and needs of those employees.

In this regard, the One Key decision is, in effect, addressed to the Commission, telling the Commission what it must do to properly discharge its approval function.

It follows that it can be expected that, in its approval processes and practices, the Commission will conform to what is said in the One Key decision regarding how the Commission needs to go about deciding whether it is satisfied that the explanation to employees’ requirement is met.

This aspect of instructing the Commission about how it performs its approval function is reflected in the following passages from the One Key decision:

  • At paragraph [116] the Court stated:

How could the Commission decide that a genuine agreement had been reached without having evidence upon which it could answer both [the questions posed by s.180(5)]? Without knowing the terms in which the explanation had been conveyed how could the Commission form an opinion on the sufficiency of the explanation, particularly having regard to the considerations mentioned in s 180(6)? Ultimately, how could the Commission decide that a genuine agreement had been reached without having evidence upon which it could answer both these questions?’

  • Earlier at [112] the Court stated:

In order to reach the requisite state of satisfaction that s 180(5) had been complied with, the Commission was required to consider the content of the explanation and the terms in which it was conveyed, having regard to all the circumstances and needs of the employees and the nature of the changes made by the Agreement.’ (bold emphasis added)

Also, in paragraph [112] the Court said this regarding the material that had been placed before the Commission in support of the application for approval of the One Key enterprise agreement:

[112] It is common ground that the Commission was never told what was said to the relevant employees. It was simply told that they had been given an explanation of the terms of the Agreement and the effect of those terms. In effect, this amounted to little more than a self-serving statement that the employer had complied with its obligation under the Act. OKW contended that the fact that it made such a statement in a statutory declaration was significant. It is not. As the CFMEU argued, whether all reasonable steps were taken to ensure that the effect of the terms of the Agreement was explained in an appropriate manner is a question of substance, not form. The recital of a conclusion on the very question the Commission was required (through an evaluative process) to determine is not, without more, a sufficient basis for the satisfaction of the statutory test. In other words, a bare statement by an employer that an explanation has been given is an inadequate foundation upon which to reach a state of satisfaction….’(bold emphasis added)

Placed in the context of the Commission prescribed enterprise agreement approval documentation, the practical consequence for approval applicants of this second implication can be put in terms,  that, in order to persuade the Commission that it ought to be satisfied on the explanation to employees requirement, it is necessary to place before the Commission the content of the explanation given to the employees: see Re Construction, Forestry, Maritime, Mining and Energy Union [2018] FWC 4495 at [11].

This suggests that in a case where the explanation is provided to employees by writing in a document or documents, the information provided under item 2.6 of the statutory declaration in support of an application for approval of an enterprise agreement (i.e. Form F17) needs to refer to and relate the content of the document(s) or annex them.

If the explanation has been given orally (a method which may well in many cases raise adequacy of explanation issues), the content of the explanation given to the employees will need to be related in detail or transcript of it provided.

Comment

At least up to the handing down of the One Key decision, there must be some question as to whether the approach and practice of the Commission with respect to satisfaction of the explanation to employees’ component of the genuinely agreed requirement conformed with what the One Key decision has now stated is necessary. (The facts of the One Key decision are an instance of the Commission not following an approach which conforms –  the employer’s statutory declaration merely asserted that the employees had been given – there was no material placed before the Commission which enabled it to judge for itself whether the explanation given conformed to ss.180(5)&(6).)

But whatever has been the past practice, as observed above, it can reasonably be expected that the Commission from now on will apply an approach that conforms to the One Key decision and that where the content of the statutory declarations is wanting on the explanation to employees requirement, requisitions will be made on applicants to furnish the necessary material to allow the Commission to decide the genuinely agreed issue in line with the One Key decision.

Also, those making statutory declarations in support of applications for Commission approval of enterprise agreements need to be keep steadily in mind the legal obligations that rest on persons who make statutory declarations.

Third Implication

The third implication of the One Key decision is only relevant to an enterprise agreement that has the feature described below and hence, while that implication relates to an issue that had been of considerable ongoing controversy, it will not be relevant to many enterprise agreement making exercises.

The third implication stems from an interpretation that the Full Court placed on another component of the s.188 genuinely agreed requirement, namely, that referred to in s.188(c) that the Commission be satisfied that there are ‘no other grounds [i.e. grounds other than those specified in s.188(a) and (b)] for believing that the agreement has not been genuinely agreed to by the employees’.

This third implication is that an enterprise agreement which is expressed to cover a large number of occupational classifications in an industry and/or numerous other occupations in other industries, that is made with a ‘franchise’ of employees who work only in a few of those occupational classifications may well not be approved by the Commission because the Commission will consider that there are other grounds for believing that the agreement has not been genuinely agreed to by the employees.

The reasoning by which the Full Court reached the conclusion from which the third implication arises is quite involved.

In the end, as we would express it, the fundamental conclusion reached by the Full Court is that the component of the genuinely agreed requirement referred to in s.188(c) (i.e. that the Commission be satisfied that there are no reasonable grounds for believing that the enterprise agreement has not been genuinely agreed to by the relevant employees) requires the Commission to ask itself whether, looking at the enterprise agreement and the circumstances in which it was made, are there are reasonable grounds for it to believe that the agreement of the employees to the enterprise agreement was not real or authentic in the sense of the employees having an appreciation of the terms and conditions provided by the enterprise agreement across the range of employees covered.

The course of reasoning of the Full Court behind that conclusion was essentially that:

  • The use of the word ‘genuinely’ in the phrase ‘genuinely agreed’ in s.188 connotes that more than mere agreement of employees (in the sense of agreement unaffected by fraud, coercion or duress) is required – consent of a ‘higher quality’ is required.
  • Therefore, the inquiry under s.188(a) as to whether there are no other reasonable grounds for believing that the employees had not genuinely agreed to the enterprise agreement was an inquiry that went also to whether the employees had an informed and genuine understanding of what it was they were being asked to agree to. (This construction of s.188 promoted the purpose or object of the FW Act, so the Full Court reasoned, in particular, the ‘legislative objective of achieving ‘fairness through an emphasis on enterprise-level collective bargaining’. The Full Court said that object ‘could be undermined if the employees who vote on the agreement had no basis for appreciating its nature and terms’: [156])
  • The critical circumstances concerning the enterprise agreement for which approval had been sought and given in the One Key case were that:
    • It was expressed to cover employees who performed work in a large and diverse range of occupational classifications across a number of industries –  the agreement stated it covered employees employed to work anywhere in Australia) whose employment would, but for the operation of the agreement, be covered by any of 11 named awards.
    • There were only three employees who were employed by One Key at the time who were covered by that agreement (two of whom were casuals) and they were not familiar with employment in or the work of many of the classifications and industries covered.
  • The Commission in approving the enterprise agreement did not consider whether in those circumstances the employees had ‘a sufficient appreciation of the appropriateness of the terms and conditions proposed for the disparate occupational classifications covered, including in industries foreign to their own’.
  • The failure to do so constituted a jurisdictional error on the part of the Commission.

 

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